A recent report on the performance of listed commercial banks in the GCC has revealed that the profits of such banks in the UAE dropped an average 38.9% in the first half of 2020. The report published by KPMG says that the decline was mainly due to the higher-than-expected credit losses on loans and advances.
The losses in this regard increased by 125.8% on an average, compared to the previous year. The quality of credit exposures has also deteriorated, resulting in an increase in the non-performing loan ratio from 3.8% on 31 December, 2019, to 4.1% on 30 June 2020, for the UAE’s top banks.
Abbas Basrai, Partner and Head of Financial Services at KPMG Lower Gulf, commented: “KPMG’s analysis shows that the UAE banking sector has remained resilient, despite a challenging operating environment and a drop in net profits from the top 10 listed banks. Stakeholders’ focus is shifting towards stability, solvency, and liquidity. It remains to be seen whether this will trigger another wave of mergers and acquisitions in the region’s banking sector.”
The report also welcomed a USD 70 billion stimulus package announced by the Central Bank of the UAE (CBUAE). The package came out at a time when banks are facing an unprecedented demand for greater liquidity, says the report.
GCC governments and central banks also announced various economic support measures including payment holidays for borrowers and targeted liquidity support for banks. To maintain stability in the sector during unprecedented times, some regulators have also provided specific relief from capital norms and certain accounting guidelines.
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